Australian Energy Market Operator

AEMO operates Australia's National Electricity Market (NEM), the interconnected power system in Australia’s eastern and south-eastern seaboard, and the Wholesale Electricity Market (WEM) and power system in Western Australia.

AEMO operates gas retail markets in New South Wales and the Australian Capital Territory, Queensland, South Australia, Victoria, and Western Australia. AEMO also operates wholesale gas markets in south-eastern Australia, those being the Declared Wholesale Gas Market in Victoria (DWGM), the Short Term Trading Market in Adelaide, Brisbane and Sydney (STTM), and the Gas Supply Hub (GSH), whose trading locations are based at Wallumbilla in Queensland, and Moomba in South Australia. AEMO also operates the Natural Gas Services Bulletin Board (GBB), and is system operator of the Victorian Gas Declared Transmission System. AEMO is also responsible for Gas Services Information functions in Western Australia.

AEMO must verify and test each facility to ensure it is capable of meeting its reserve capacity obligations. Generation facilities must be tested twice a year – once in winter and once in summer – and demand side programs (DSPs) must be tested once a year. Other testing may also be required. Testing must be undertaken for each fuel type the facility is certified to operate on.

A facility may pass by observation if it operates at the required test level for at least one half-hour trading interval. This reduces the costs of testing for market participants.

If a facility has not passed by observation for a testing period, AEMO follows these steps:

Requests system management to test the facility over two consecutive trading intervals.

If the facility fails this test, AEMO requests system management to re-test the facility between 14 and 28 days after the first test.

If the facility fails the second test, its capacity credits will be reduced to the maximum output achieved during either test.

The market participant may request a third test where it has failed both previous tests. Upon passing the third test, the capacity credits will be reinstated, or set at the level of output achieved during the third test.

Demand side program verification testing

In addition to the facility test above, DSPs must also undertake verification testing between 1 October and 30 November of each year (or, in the case of a new DSP, within 20 days of registration).

Verification tests require the DSP to demonstrate a reduction in demand of at least 10% of the capacity credits assigned.

Market participants must notify AEMO and system management, at least two business days before the test, of the intervals in which a verification test is to be conducted. If this notification is not provided, AEMO will not consider this test.

If a DSP fails a test, AEMO must reduce its capacity credits to zero. The market participant may schedule a re-test to have the capacity credits restored.